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Real Estate Professionals Explained: Agent, Broker, REALTOR®

If you’re entering the real estate market for the first time, you may find real estate professionals’ various titles a little confusing. Sometimes consumers use these titles interchangeably, but there are some important differences between the roles of the various professionals, as well as different requirements for using particular titles.

Titles for real estate professionals

The real estate profession is regulated by state governments, which have different requirements for earning a license. In general, though, the titles you may come across include:

  • Real estate agent: Anyone who earns a real estate license can be called a real estate agent, whether that license is as a sales professional, an associate broker or a broker. State requirements vary, but in all states you must take a minimum number of classes and pass a test to earn your license.
  • REALTOR®: A real estate agent who is a member of the National Association of REALTORS®, which means that he or she must uphold the standards of the association and its code of ethics.
  • Real estate broker: A person who has taken education beyond the agent level as required by state laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.
  • Real estate salesperson: Another name for a real estate agent.
  • Real estate associate broker: Someone who has taken additional education classes and earned a broker’s license but chooses to work under the management of a broker.

Working With a Real Estate Professional

While you are more likely to work directly with a real estate salesperson or an associate broker, some brokers provide services for buyers and sellers themselves. If you have hired a real estate agent to help you buy or sell a home, that agent typically reports to a broker. The broker handles the earnest money deposit and establishes the escrow account.

n addition, the broker bears responsibility for the actions of the real estate agents under his or her supervision. While the majority of real estate transactions go through without any glitches, a broker will step in if there are any problems with your home purchase or sale.

If you are unhappy with your real estate agent and cannot resolve the issues directly, your next step should be to talk with the broker to ask for help and perhaps another agent for you to consult.

Experience and Education

Real estate brokers not only have higher education requirements than real estate salespersons, they also must have experience working as an agent. For example, in Virginia the license requirements are as follows:

  • A salesperson must take 60 hours of classes and pass an exam with both state and national sections.
  • A broker must take 180 hours of broker-specific classes, pass an exam with both state and national sections, and have actively worked as a real estate salesperson for 36 of the previous 48 months.

When you are looking for a real estate professional, it is wise to work with a member of the National Association of REALTORS® who is committed to maintaining the professionalism of the real estate business. You can choose to work with a salesperson or a broker, but in any case you should take the time to interview your agent and ask for references.

If you want to work with someone new to the profession, you may want to ask to meet the broker as well so you can feel comfortable that someone with experience will be representing your interests.

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What Is Escrow? How It Keeps Home Buyers and Sellers Safe

What is escrow? In the home-buying process, escrow is a secure holding area where important items (like the earnest money check and contracts) are kept safe until the deal is closed and the house officially changes hands.

How escrow works

The escrow officer is a third party—perhaps someone from the closing company, an attorney, or a title company agent (customs vary by state), says Andy Prasky, a real estate professional with Re/Max Advantage Plus in Twin Cities. The third party is there to make sure everything during the closing proceeds smoothly, including the transfers of money and documents. Escrow protects all the relevant parties by ensuring that no funds and property change hands until all conditions in the agreement have been met.

Along the way, proper documentation is filed with the escrow officer as each step toward closing is completed. Contingencies that might be part of the process could include home inspectionrepairs, and other tasks that need to be accomplished by the buyer or seller. And every time one of those steps is completed, the buyer or seller signs off with a contingency release form; then the transaction moves on to the next step (and one step closer to closing).

Once all conditions are met and the deal is finalized, the money due to the sellers is transferred to them. Meanwhile an escrow officer clears (or records) the title, which means the buyer officially owns the home.

How much does escrow cost?

That varies—as well as whether the buyer or seller (or both) pays—with the fee for this service typically totaling about 1% to 2% of the cost of the home.

How escrow protects buyers and sellers

Escrow may seem like a pain, but here’s how it can work in your favor. Let’s say, for example, the buyer had a home inspection contingency and discovered that the roof needed repairs. The seller agrees to fix the roof. However, during the buyer’s final walk-through, she finds that the roof hasn’t been repaired as expected. In this case, the sellers won’t see a dime of the buyer’s money until they fix that roof. Talk about a nice safeguard for the buyer!

Sellers benefit from escrow, too: Let’s say the buyers get cold feet at the last minute and bail on the deal. This may be disappointing to the seller, but at the very least, buyers have typically ponied up a sizable chunk of change for their earnest money deposit. This money, often totaling 1% to 2% of the purchase price of a home, has been held in escrow. When buyers back out with no legitimate reason, they forfeit that money to the seller—a decent consolation for the sale’s failure.

Escrow, in other words, is the equivalent of bumpers on cars, keeping everyone safe as they move forward in a real estate transaction. Odds are, no one’s trying to swindle anyone. But isn’t it nice to know that if something does go wrong, escrow is there to cushion the blow?

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The Earnest Money Deposit: What You Should Know

The earnest money deposit is an important part of the home buyingprocess. It tells the seller you’re a committed buyer, and it helps fund your down payment.

Without earnest money, you could make offers on many homes, essentially taking them off the market until you decided which one you liked best. Sellers rarely accept offers without deposits.

Assuming that all goes well and your offer is accepted by the seller, the earnest money will go toward the down payment and closing costs. In many circumstances, you can get most of your deposit back if you discover something that you don’t like about the home.

How much should you put down in the earnest money deposit?

The amount you’ll pay for the earnest money deposit will depend on a few factors, such as policies and limitations in your state, the current real estate market, and what the seller requires. On average, however, you can expect to hand over 1-2% of the total purchase price as earnest money.

In some real estate markets you may end up putting down more or less than the average amount. In a real estate market where homes aren’t selling quickly, the seller may only require 1% or less for the earnest money deposit. In markets where demand is high, the seller may ask for a higher deposit, perhaps as much as 2-3%. You can sometimes win a bid if you give the seller a large deposit. In fact, the seller may be willing to come down in price a little if you make a bigger deposit.

However, you may wind up having to do some paperwork for your mortgage lender, and the bank may want to verify the source of the funds for larger deposits. It won’t be a problem if you can show that you’ve had the money for at least 60 days.

When do you pay the earnest money, and who holds it?

In most cases, after your offer is accepted and you sign the purchase agreement, you give your earnest money deposit to the title company. In some states, the real estate broker holds the deposit.

Always check the credentials of the firm or broker taking the deposit and verify that the funds will be held in escrow. Never give the earnest money to the seller; it could be difficult or impossible to get it back if something goes wrong.

After turning over the deposit, the funds are held in an escrow account until the home sale is in the final stages. Once everything is ready, the funds are released from escrow and applied to your down payment.

Can you get your earnest money back?

If the deal falls through, a small cancellation fee is usually taken out of the deposit, but the remainder remains in escrow. Whoever holds the deposit determines whether you should get the money back under the terms of the purchase agreement. Make sure that the purchase agreement covers how a refund is handled.

To be on the safe side, make sure the purchase agreement covers how a refund would be handled. Keep in mind that even if you are pre-approved for a mortgage loan, you can be declined when you apply for one. In such cases, standard contracts allow you to recover your earnest money deposit. You can also usually get your money back if you find problems with the property.

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6 Reasons You Should Never Buy or Sell a Home Without an Agent

It’s a slow Sunday morning. You’ve just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.

You’re DIYing this real estate thing, and you think you’re doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.

Oh, dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn’t. This is likely the biggest financial decision of your entire life, and you need a Realtor® if you want to do it right. Here’s why.

1. They have loads of expertise

Want to check the MLS for a 4B/2B with an EIK and a W/DReal estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.

Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.

2. They have turbocharged searching power

The Internet is awesome. You can find almost anything—anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, any time you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.

Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it’s just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.

3. They have bullish negotiating chops

Any time you buy or sell a home, you’re going to encounter negotiations—and as today’s housing market heats up, those negotiations are more likely than ever to get a little heated.

You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don’t you want a savvy and professional negotiator on your side to seal the best deal for you?

And it’s not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.

4. They’re connected to everyone

Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they’re all in your Realtor’s network. Use them.

5. They adhere to a strict code of ethics

Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors®, the largest trade group in the country.

What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.

6. They’re your sage parent/data analyst/therapist—all rolled into one

The thing about Realtors: They wear a lot of different hats. Sure, they’re salespeople, but they actually do a whole heck of a lot to earn their commission. They’re constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you’re selling). They’re researching comps to make sure you’re getting the best deal.

And, of course, they’re working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn’t a responsibility Realtors take lightly.

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Video tour

The Consumer Financial Protection Bureau announced on Wednesday a proposal to delay the effective date of the TILA-RESPA Integrated Disclosure rule until Oct. 1.

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Real Estate Roundup!

May new home sales gain 2.2% from April

Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, which is up 2.2% from April, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. — From Housing Wire

3 ways to tame student loan debt and afford a mortgage

It’s no secret that student loans can make buying a home a challenge. But what exactly is the problem, and how can buyers overcome it? The problem is that student loans can be included in the buyer’s debt-to-income ratio, or DTI. — From Bankrate

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We’re ready for the TRID rules!

At 5 p.m. EST June 17, the Consumer Financial Protection Bureau issued a statement that the effective date for the TILA-RESPA Integrated Disclosure (TRID) rules would be pushed back to Oct. 1, 2015.

CFPB Director Richard Cordray said in a prepared statement: “The CFPB will be issuing a proposed amendment to delay the effective date of the Know Before You Owe rule until Oct. 1, 2015. We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks. We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.”

Rainier Title has been working towards the TRID implementation for over a year and felt prepared for August 1st. However, with the proposed delay we will be taking this opportunity to continue our education and training of TRID. While we believe that we have been proactive and ready for this change, there are still so many unknowns that will have to be addressed at the time of implementation. The industry should still prepare for 45-60 days for transaction to close due to the new timing parameters of the forms.

We’re working hard to be ready for all changes!

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Real Estate Roundup

Active Home-Building Industry Will Lead to More Demand for Warehouse Space

Strong consumer spending and the rise in housing construction activity are currently the prime factors for the incredible rebound of the U.S. industrial real estate sector, and experts say as home buying continues to increase, so will demand for warehouse space. — From NRE Online

To Buy or Not to Buy: That Is the Developer’s Question

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